The resumption of industrial activities and the growing demand for raw materials amid the deepening of supply chain disruptions due to the ongoing Russia-Ukraine war and resurgence of COVID-19 cases have led to skyrocketing demand for transportation services.
The Dow Jones Transportation Average or ‘Dow Transports,’ a price-weighted average of 20 transportation stocks, has gained marginally over the past week versus the Dow Jones Industrial Average’s 2.5% loss.
Therefore, fundamentally sound transportation stocks in the Dow Transports index, Matson, Inc. (MATX), United Parcel Service, Inc. (UPS), Ryder System, Inc. (R), Union Pacific Corporation (UNP), and Landstar System, Inc. (LSTR), could be ideal bets now.
Matson, Inc. (MATX)
MATX operates as an ocean freight carrier and offers multimodal transportation brokerage of domestic and international rail intermodal services, long-haul and regional highway trucking services, supply chain services, LTL transportation services, and third-party logistics services. The company serves the U.S. military, freight forwarders, retailers, consumer goods, automobile manufacturers, and others.
For its fiscal year 2021 fourth quarter ended December 31, 2021, MATX’s total operating revenue increased 81% year-over-year to $1.27 billion. The company’s operating income came in at $475.50 million, up 304% from the prior-year period. MATX’s net income came in at $394.50 million, indicating a 360.9% year-over-year improvement. Its EPS increased 379.1% year-over-year to $9.39. MATX had cash and cash equivalents of $282.40 million as of December 31, 2021.
Analysts expect MATX’s EPS to grow 21.8% year-over-year to $26.14 for its fiscal year 2022, ending December 31, 2022. It surpassed Street EPS estimates in each of the trailing four quarters, which is impressive. The consensus revenue estimate of $4.36 billion for the same fiscal year represents an 11.1% rise from the prior-year period. Over the past year, the stock has gained 29.6% and closed Friday’s trading session at $87.33.
MATX’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
It has an A grade for Growth and a B grade for Value, Momentum, and Quality. Click here to see the additional ratings for MATX’s Sentiment and Stability.
MATX is ranked #4 of 45 stocks in the A-rated Shipping industry.
United Parcel Service, Inc. (UPS)
UPS provides letter and package delivery, transportation, logistics, and financial services worldwide. The company operates through three segments – U.S. Domestic Package; International Package; and Supply Chain & Freight. Its services include ground freight, ocean freight, air freight, customs brokerage, and insurance.
On December 10, 2021, UPS Supply Chain Solutions (UPS SCS) opened its first innovation center globally ─ the UPS SCS Asia Pacific Innovation Centre in Singapore – to accelerate the digital transformation of businesses in Asia and connect them with emerging technologies in logistics. Because companies in the Asia Pacific region are pouring increasing investments into warehouse automation technologies to enhance productivity and competitiveness, UPS’ innovation center should witness surging demand going forward.
UPS’ non-GAAP total revenue increased 12.5% year-over-year to $27.85 billion in its fiscal 2021 fourth quarter ended December 31, 2021. The company’s non-GAAP total operating profit came in at $3.95 billion for the quarter, up 37.7% from the prior-year period. While its non-GAAP net income increased 35.6% year-over-year to $3.15 billion, its non-GAAP EPS increased 35% to $3.59. As of December 31, 2021, the company had $10.26 billion in cash and cash equivalents.
Analysts expect UPS’ EPS to improve 5.7% year-over-year to $12.82 in fiscal 2022, ending December 31, 2022. The company surpassed Street EPS estimates in each of the trailing four quarters, which is impressive. The consensus revenue estimate of $102.09 billion for the same fiscal year indicates a 4.9% year-over-year improvement. Over the past year, the stock has gained 5.4% and ended Friday’s trading session at $187.15.
UPS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
It has a B grade for Sentiment and Quality. Click here to see the additional ratings for UPS (Value, Growth, Stability, and Momentum).
UPS is ranked #6 of 18 stocks in the B-rated Air Freight & Shipping Services industry.
Ryder System, Inc. (R)
R provides commercial fleet management, supply chain, and transportation management solutions worldwide to small businesses and large enterprises. The company offers full-service leasing, commercial rental, and maintenance of trucks, tractors, trailers, and integrated services. It also provides financing to its customers to purchase a selection of used trucks, tractors, and trailers through its used vehicle sales program.
On March 8, 2022, Southern Glazer’s Wine & Spirits, the nation’s largest wine and spirits distributor, announced to implement R’s one-of-a-kind visibility and collaborative logistics technology RyderShare and make its inbound supply chain more efficient and resilient. Despite managing Southern Glazer’s vehicle lease and maintenance operations over the years, R’s transportation management team handle transportation procurement, load planning, and optimization, tender management, event management and visibility, and business intelligence, analytics, and reporting. This will nurture R’s long-standing relationship with Southern Glazer’s.
R’s total revenues for its fiscal 2021 fourth quarter ended December 31, 2021, increased 17.5% year-over-year to $2.60 billion. The company’s comparable pre-tax earnings came in at $245.60 million, up 408.5% from the prior-year period. Its net earnings came in at $181.10 million for the quarter, representing a 607.4% rise from the prior-year period. R’s comparable EPS increased 324.1% year-over-year to $3.52. It had $234 million in cash and cash equivalents as of December 31, 2021.
Analysts expect the stock’s EPS to hit $11.60 for fiscal 2022 ending December 31, 2022, representing a 21.1% rise from the prior-year period. It surpassed Street EPS estimates in each of the trailing four quarters, which is impressive. The consensus revenue estimate of $10.88 billion for the same fiscal year indicates a 12.6% year-over-year improvement. The stock has lost 8.7% over the past year and closed Friday’s trading session at $67.46.
R’s POWR Ratings reflect its solid prospects. It has an overall rating of B, which equates to Buy in our proprietary rating system.
The stock has an A grade for Growth and a B grade for Value and Momentum. In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for R’s Quality, Sentiment, and Stability, here.
R is ranked #11 of 89 stocks in the A-rated Industrial - Services industry.
Union Pacific Corporation (UNP)
UNP hauls agricultural, automotive, and chemical products and offers long-haul routes from all major West Coast and Gulf Coast ports to eastern gateways and connects with Canada’s rail systems, and serves the major gateways to Mexico. As of December 31, 2021, its rail network included 32,452 route miles.
On March 8, 2022, UNP announced it would begin using a higher biodiesel blend in locomotives it acquired from Wabtec Corporation (WAB), a leading global provider of technology products and services for the rail industry. UNP will begin testing B20 biodiesel and R55 renewable diesel on trains powered by Wabtec FDL engines in the second quarter. This collaboration will help UNP increase the percentage of low-carbon fuels consumed to 10% of its total diesel consumption by 2025 and 20% by 2030.
UNP’s total operating revenues for its fiscal 2022 first quarter ended March 31, 2022, increased 17.2% year-over-year to $5.86 billion. The company’s operating income came in at $2.38 billion, indicating a 19.3% year-over-year improvement. Its net income increased 21.6% year-over-year to $1.63 billion. UNP’s EPS came in at $2.57, up 28.5% from the prior-year period. As of March 31, 2022, the company had $909 million in cash and cash equivalents.
Analysts expect the company’s EPS to reach $11.70 for fiscal 2022 ending December 31, 2022, representing a 17.6% rise from the prior-year period. It surpassed the consensus EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $24.24 billion for the same fiscal year indicates an 11.2% rise from the prior-year period. Over the past year, the stock has gained 7.5% and ended Friday’s trading session at $234.30.
UNP’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
The stock has a B grade for Stability, Momentum, and Quality. Click here to see the additional ratings for UNP (Growth, Sentiment, and Value).
UNP is ranked #3 of 16 stocks in the B-rated Railroads industry.
Landstar System, Inc. (LSTR)
LSTR provides integrated transportation management solutions internationally. The company operates through two segments ─ Transportation Logistics; and Insurance. It markets its services through independent commission sales agents and third-party capacity providers.
For its fiscal 2022 first quarter ended February 28, 2022, LSTR’s revenue increased 53.1% year-over-year to $1.97 billion. The company’s operating income came in at $162.83 million for the quarter, indicating a 57.7% year-over-year improvement. Its net income came in at $124.84 million, representing a 61.6% rise from the prior-year period. LSTR’s EPS increased 66.2% year-over-year to $3.34. The company had $146.03 million in cash and equivalents as of March 26, 2022.
Analysts expect the company’s EPS to improve 11.7% year-over-year to $11.30 in fiscal 2022, ending December 31, 2022. It surpassed Street EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $7.20 billion for the same fiscal year represents a 10.2% rise from the prior-year period. Over the past year, the stock has lost 8.5% and closed Friday’s trading session at $152.92.
LSTR’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
It has a B grade for Growth and Quality. Click here to see the additional ratings for LSTR (Stability, Sentiment, Value, and Momentum).
The stock is ranked #10 of 22 stocks in the A-rated Trucking Freight industry.
MATX shares were trading at $84.58 per share on Monday afternoon, down $2.75 (-3.15%). Year-to-date, MATX has declined -5.74%, versus a -9.50% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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